A novice financier may not immediately understand the abundance of terms securities market. One of these concepts is aval, certifying the guarantee of the borrower. What is aval? What is its advantage? What subjects have the rights to avalinate bills?
Definition
Aval - an inscription on a bill, which is a guarantee of a third party to pay it. The procedure for applying for a guarantee is called avalanche. The side of the guarantor, respectively, is called an avalist.
Often banks act as an avalist, thereby increasing the market value of the bill and guaranteeing the repayment of funds by the debtor.
Since an aval is a guarantee of an unpaid bill of exchange by a third party, the avalist assumes the obligation to pay the debt in case the main payer refuses to fulfill the obligations undertaken.
Aval is not just a guarantee. Even if the availed bill becomes invalid, the avalist will be obliged to pay the debt of the borrower to the creditor. All rights transferred to the borrower are acquired by the avalist.
Avalist obligations
The avalist is liable for the obligation to the same extent as the drawer. Moreover, his obligation on a bill of exchange will be recognized as valid, even if the obligation guaranteed by him will be declared invalid. In this case, the aval is bank guarantee even if the guarantee is accessory or additional.
The avalist incurs the same promissory note obligations as the borrower. The procedure for avalizing a bill of exchange enables the company issuing a guarantee to obtain a deferment in payment for goods and services received, while at the same time giving the transaction guarantee obligations to pay the amounts indicated by the aval.
A guarantee of an avalist is a written guarantee of payment on a bill - an aval. A bill guarantee is accepted for the entire amount of the bill, or for some part of the debt.
Thus, aval is a way of securing payment by bill guarantee.
Avaliable bill
What is a bill of exchange, its features and advantages? Aval is a signature on a bill that significantly increases the value of a given paper. It is this signature that is the guarantor of the obligation to pay. Most often, the bank itself becomes the avalist. The bill guarantor bears full responsibility to the bill holder and undertakes to fulfill all conditions.
After the redemption of the aval, the guarantor transfers all the rights stipulated in the security. Legally, aval is equivalent to a guarantee. The avalist assumes all obligations for the execution of the bill, in case of failure to fulfill these obligations by the main payer, as a result of which the avalist has the right to demand the execution of debt obligations.
Avaluation of Bills
Avaluation is a procedure for registering an aval by a bank. The Bank assumes the obligation to pay part or all of the bill for one of the persons who are responsible for the repayment of the bill.
Aval of bills of exchange is carried out by the bank when processing the repayment of debts for work performed, delivered goods, services rendered, and so on ... Aval can be executed at various times of processing the bill. Both at the initial stage and at the stage of completion.
In order to avalize a bill, it is necessary to indicate on it “count as an aval”, put a signature on the front side of the security or on the allange (addendum). According to the law, the inscription itself has no legal value.However, any signature on a bill will be considered an aval.
The avalist, if desired, can indicate who he is responsible for. If such a record is not available, then the aval is given for the drawer by default.
The guarantee takes legal force even if guarantee obligation not valid. The only exception that cancels the aval is the incorrect compilation of the avalized bill itself.
Aval operations:
- deals with tolling raw materials FEA;
- the amount of excise duty from enterprises that use excisable raw materials in production;
- commercial avals for sales transactions.
Benefits of Using Aval Bills
A bill with bank aval is a more valuable security, as it is backed by a strong and reliable guarantee of redemption. When a bill is avaliable, the bank guarantees payment on it. Aval is provided at any time. At any stage of the payer's request. He does not lose his legal force. The only exception is a defect in the design form.
Leasing of bills by commercial banks on the basis of a bill drawer agreement on avalanche is concluded for a specified period. Also, the maturity may be agreed upon by an additional agreement. A commercial bank gives an avaliable bill of exchange additional value in the securities market and is a guarantor for the fulfillment of obligations.
